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  • Debt & Negative Equity

    Dilemma - Stick ,Twist or Fold.

    longtime lurker New Poster.

    My first property Mistake. 2006

    Purchased furnished leasehold flat in Northwest Lancashire

    Fast forward today.

    Current 40 something tenant wishes to purchase flat. (Offered to sell her flat MV last year Declined )

    Property investor father cash offer @ 85k offer made in view of boiler 2.5k and decorations 5k ( assume new kitchen).

    Dilemma part.

    Distressed investors or owner occupiers  sold 3 flats in other blocks within last 6 months 80-85k  so I can see why offer has been made now.

    Using future headwinds as negotiation tactics - Thursday interest rate rise and brexit, future costs.

    two other flats on market @ 95k and 90k.

    Do I say goodbye to 25k and stump up from Savings 15k today? Or be patient and wait next 10 years to recoup.

    Help appreciated.

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 

    Hi Investorsk8,

    This is an increasingly common issue. We've been helping Landlords / Investors with similar issues for a number of years.

    You may be able to sell this property and "settle" the shortfall for less than the full outstanding amount - some examples of cases we've completed: 

    To establish if this is possible and what your other options are it would be worthwhile getting in touch - 0161 631 2727.

    Regards

    Tom

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    It depends on what you think the prospects are for the property

    Will rent increase in coming years

    Will it grow possibly in value in coming years

    If not you may think of selling ???

    I still think If a Landlord holds on it can be a money winner

    but if its a drain and its causing stress it could be right to off load

    and the bottom line is what are your plans for the future

    do you want to be a Landlord ????

    Interest  rates will rise But I also think rents will rise too

    Best of Luck DL


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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    To the OP

    Your negative cash flow

    Have you factored S24 into your current £25 monthly loss?

    If not then you could in 4 years time be losing £50 pm

    Time to do the S24 calculation

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    Hello fellow investors.

    I doubt market rent will take any more increases,

    but I notified tenant increase will be present if rate changes this week.

    @DL

    Government interference in PRS and possibility of market correction, other headwinds means I choose to give up the pension dream and sell up.

    It's hard to keep going when you don't see any benefit. I waited patiently 10 years with nothing to show for it, except headaches and horrible experiences.

    Thanks to all who replied.

    If writing off the debt involves some form of bankrupty not interested sorry.

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 

    Your wife's wages have nothing to do with S24

    You still will be affected by it

    You need to use one of the many S24 calculators as I don't believe you fully understand  S24.

    The more income you earn which includes your mortgage debt interest it may push you into being a HRT.

    But you will lose 75% of your tax relief  on mortgage  interest.

    Therefore you will need to subsidise your property even more as your tax bill increases following the loss of 75% of your mortgage tax relief

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    There are many  other ways of resolving debt write offs that doesn't require bankruptcy

    Speak to national debtline or stepchange

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    Would writing of debt still work when you have equity in your main home or in other property you own. surely a debt write off will look whole circumstances.?

    Will do s24 calculation again. But I can't change anything ,

    putting up rent only increases the tax paid and can only put them up so much. Market forces dictates what is acceptable according to availability. And then rent caps will come in no matter who is in power. Vote winner.

    Section 24 - if borderline between higher rate and basic rate.

    Few solutions Earn less, more workplace pension contributions or go part-time.

    Increase expenses by changing cosmetic decoration, carpets, painting and going to more landlord events, driving around more looking a potential properties to buy.


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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 


    Indeed it is a complex situation

    Irrespective  of tax you need to find the money to pay for S24 or you have to find the money from your own resources

    But yes it is an infinite process

    The more rent you charge the more tax you will have to pay.

    I suggest  a chat with the debt charities

    Indeed it may be that to save your negative equity property you have to  work hard to save it.

    A bit galling I know;  but far less traumatic than losing the family home by not servicing the tax on the property

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    Be patient

    Its just like buying a new car .

    That goes down in value at least £25 pcm  but some people still buy them and smile

    People pay at least £25 pcm   into pension schemes

    If you view the £25 loss as the same as contributing to a pension scheme then consider let sleeping dogs lie

    In 25 years time it will be worth maybe circa 250K  and your pension fund will pay out and you will smile

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    Jonathan Clarke. http://www.buytoletmk.com

    I'm going to pose a  "Mathematics of Property purchase / greater fool principle" in another topic to which I would interested in your input Mr Clarke.

    It's hard to stay positive when you look at numbers without rose tinted glasses on. I believed the course gurus hype ten years ago about doubling prices but they don't suffer the consequences and all I was sold was an expensive pipedream.

    Im older and wiser now than 10  a years ago and hopefully my  knowledge to date and mistakes will pay dividends for my sons.

    I tried to think of it like buying shares in a LSE listed company and would I sell @ 15k loss now or be patient for recovery however shares do not have ongoing maintenance costs boiler etc.

    Have a nice day all.


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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs.